Consumers: will be motivated by cost savings above all else – which amount to 10% of total household income (a minimum of $5,600 per year). The scale of the savings will override other factors like love of driving or ownership. The value of additional free time to work or do other things will support this. Pent-up demand for TaaS from those excluded from transport (the elderly, disabled or poor), the replacement of current taxis and ride-hailing networks, and early adopters, will ensure TaaS demand gets a fast start.
Businesses: will be motivated to seize market share by flooding local markets with vehicles, given the winners-take-all dynamic of the networks effect for TaaS fleets (the more vehicles, the better the availability, the more customers) and by the size of the potential market and the existential risk to their existing business. This will ensure vehicle supply meets demand. They will face a competitive market environment where price trends towards cost, meaning consumers benefit as cost savings are passed on in lower prices.
TaaS will get a fast start in cities and then radiate outwards to suburban and rural areas. As adoption increases, a tipping point in availability will be reached early, when it becomes feasible for car owners to rely entirely on TaaS. As used cars supply increases and demand decreases, values will plummet. Those steadfastly sticking to individual ownership will be far more likely to buy used cars, driving down new car purchases dramatically and leading to a death spiral of reversing economies of scale, increasing costs and leading to supply chain breakdown. Over time another tipping point is reached where gas stations begin to close down, spare parts disappear and maintenance becomes harder or costlier to find. ICE vehicles will become harder and more expensive to use. Consumer opinion moves from being a brake (scared of autonomous vehicles) to being an accelerator (seeing human drivers as reckless, dangerous and slow), driving regulation that bans or restricts human-driven vehicles. Barriers perceived to slow adoption of EVs like range or charging availability are not relevant to TaaS trips where cars will have sufficient charge for trips ordered and car relays, battery swapping or fast charging will enable longer trips.
We see no supply, demand or policy constraints, meaning that within 10 years of regulatory approval of TaaS, the vast majority of passenger miles traveled (95%) in the US will be with TaaS. Even in the rural areas, where wait times and cost (due to redundant trips) might be higher, lower incomes will motivate adoption as will the increasing cost and difficulty of using a gasoline vehicle. The only hold-outs might be the very rich, the most rural or the equivalent of those who still use horses for transport.
The key enabler of TaaS is autonomous technology. Its availability is based on both technological progress and regulation. Given our analysis of both we have high confidence that it will begin in 2020-25 with 2021 as the most likely date. Even if the US adopts a precautionary approach, other areas (China, Singapore, European cities) will push ahead, meaning the technology reaches readiness in this time frame. AVs learn by doing, so the more cars on the road and the more miles they cover, the faster they will be ready. Technologies that allow cars to benefit from the learning expected from 100m miles in just 1,000 miles are in development, offering a faster track to deployment. This means that by 2030 the disruption will be almost complete.
Regulation can drive this process even faster by hastening the development of AV technology through broad trials, removing barriers and accelerating adoption by ensuring universal access (the utility model) or special lanes or routes for AVs to allow faster travel and greater volume of traffic or through restrictions on humans drivers in cities or in peak times.